It’s no secret that if your business has employees, then you need to have worker’s compensation insurance. There are numerous regulations, both state and federal, in place stating that you need to do so. In addition, not only does the size of your company and its location play a role in how much you’ll have to pay for these insurance premiums, but so do your workers’ compensation class codes.
What are these class codes? And how often does misclassification happen? Here’s what you need to know about your workers’ compensation class codes and how they affect your business.
What Are Workers’ Compensation Class Codes?
One of the many factors involved in making a decision regarding workers’ compensation insurance rates is the class codes. These codes define the work that’s done for a company, ranking it in order to determine which jobs are physically tougher, and therefore more prone to injury on the job, than others.
The codes are put into place by the NCCI, or National Council on Compensation Insurance, an organization that not only ranks jobs based on physical difficulty but also tracks things like the statistics of those injured while at work in order to correctly determine the insurance rates that a company pays.
While some states may use additional or alternative coding systems, the NCCI remains the most common, so understanding their classifications is crucial for those in charge of the insurance plans. Thankfully, the NCCI provides plenty of information on their website for underwriters, insurance agents, and anyone else who makes these determinations.
How Do NCCI Codes Work?
In many cases, your business is placed under a single NCCI code. This means that everyone in your company, regardless of their individual job, falls under this same code. For example, if your business makes computers and sells them to the public or other companies, it would be coded under 3574 – Computing, Recording or Office Machine Mfg., NOC.
There are codes for every type of business that you can think of, from mining to manufacturing, plus those for standard office clerical work, like accounting. Obviously, an accounting firm would pay less for their workers’ compensation insurance than a mining company, simply based on the overall potential rate for accidents on the job. The NCCI code helps your insurance agent determine what your rates should be, based on that.
What About Misclassifications?
With that said, misclassifications can occur. It’s easy to see how it can happen, since many of the codes are close together. A single digit can differentiate between the two different types of iron and steel manufacturing, for instance, leading to potentially higher rates if the business is misclassified. Because of this, it’s important to always check these numbers.
Do You Need Help with Your Company’s Workers’ Compensation Insurance?
Although there are numerous factors that go into determining your business’ workers’ compensation rates, like how many employees you have, your company’s location, and how often employees have gotten hurt in the past, the NCCI codes are one of the most important. If you have questions regarding these codes, your insurance in general, or anything else related to workers’ compensation for your business, please reach out to Spivey Insurance. Our knowledgeable agents can answer your questions and ensure your workers’ compensation insurance is on par.
